VW earnings before interest and taxes fell 26 percent to
2.34 billion euros ($3 billion), matching the average estimate
of five analysts surveyed by Bloomberg. The carmaker today stuck
to a goal for full-year operating profit to be on the same level
as 2012. The stock rose as much as 4.5 percent for the biggest
gain in nearly four months.

“Business in the first quarter was dominated by the
difficult economic environment,” Chief Executive Officer Martin
Winterkorn said in a statement. “The markets were sluggish,
especially in Europe, and not least in Germany. But we remain
confident overall that we can pick up speed over the rest of the
year.”

VW has been offsetting a European sales decline, where
demand is at a 20-year low, with gains in deliveries in China
and the U.S. Daimler, the world’s third-largest maker of luxury
vehicles, earlier today cut its 2013 profit forecast after
first-quarter earnings tumbled more than analysts expected,
burdened by weaker Mercedes-Benz sales in China.

VW’s first-quarter operating profit was impacted by
contingency reserves in the passenger-car and power-engineering
units, the automaker said today, without providing details.

Shares Advance

VW shares climbed as much as 6.65 euros, the biggest gain
since Jan. 2, to 153.55 euros and were up 2.4 percent as of 1:25
p.m. in Frankfurt trading. The stock has declined 13 percent
this year, valuing the company at 68 billion euros. Daimler
traded 1.3 percent lower.

“The results were in line with our expectations and it was
clearly a positive signal that VW stuck to its full-year
earnings guidance,” said Frank Biller, a Stuttgart-based
analyst at LBBW who recommends buying VW stock.

VW’s first-quarter net income fell 38 percent to 1.95
billion euros, the automaker said today. Revenue declined 1.6
percent to 46.6 billion euros. Volkswagen released key earnings
for the group ahead of tomorrow’s annual general meeting and
plans to publish detailed results by brand on April 29.

Ebit at Daimler excluding one-time items will fall this
year rather than match 2012’s 8.1 billion euros as previously
predicted, the Stuttgart, Germany-based company said in a
statement. First-quarter operating profit plunged 56 percent to
917 million euros, missing the 1.06 billion-euro estimate of 11
analysts compiled by Bloomberg.

China Reorganization

Mercedes, in addition to combating slumping demand in
Europe, posted a first-quarter sales decline of 11 percent in
China as it restructures its business in the country. Mercedes
has been falling further behind competitors since losing the top
spot in global luxury-car sales to Bayerische Motoren Werke AG
in 2005 and second place to VW’s Audi in 2011.

Volkswagen is pinning its hopes for keeping up sales
volumes on the seventh generation of its best-selling Golf
compact, introduced at the end of last year. The Audi premium
brand, VW’s largest earnings contributor, has been rolling out
the revamped A3 hatchback and will add a sedan version of the
model later this year to lure American and Chinese buyers
seeking a small car with a separate trunk.

VW eked out a 0.2 percent rise in global deliveries last
month to 864,400 vehicles as demand in China and North America
more than offset shrinking sales across Europe.

“Markets were weaker than expected in the first quarter,
but evidence is increasing that this could have been the
trough,” said Daniel Schwarz, a Frankfurt-based Commerzbank AG
analyst who recommends buying the stock.

Global Race

Toyota Motor Corp. outsold all other automakers for a fifth
straight quarter as the yen’s depreciation sharpens the Japanese
company’s edge over General Motors Co. and VW. Global sales at
Toyota, including those of subsidiaries Hino Motors Ltd. and
Daihatsu Motor Co., reached 2.43 million units in the January-to-March period, spokeswoman Shino Yamada said earlier today.
That compares with GM’s 2.36 million units and VW’s 2.27 million
vehicles. VW deliveries excludes heavy trucks and buses.

VW wants to overtake GM and Toyota by 2018 at the latest to
become the world’s largest automaker.

VW’s presence in China, Brazil and Russia has enabled it to
steer through the European industry gloom better than PSA
Peugeot Citroen, Europe’s second-largest carmaker. Peugeot is
eliminating jobs and closing a factory to end losses as the
region’s auto market shows no signs of a rebound.

Peugeot today reported a 6.5 percent decline in first-quarter revenue and said additional cost savings may be
necessary next year if the market doesn’t improve.

Factory Investments

VW ramped up investments to boost its manufacturing
footprint outside Europe and is rolling out a new modular
technology to speed up development and production of new
vehicles. It has seven new Chinese plants in various stages of
planning, part of $19 billion in investments in production
outside Europe expected by 2017. After spending $1 billion on a
factory in Chattanooga, Tennessee, the company may further
increase U.S. capacity with production of a sport-utility
vehicle based on the Crossblue concept.

In addition to expanding its passenger-car operations,
Volkswagen is forging a heavy-truck alliance with its Scania and
MAN units to benefit from economies of scale through closer
cooperation and take on global market leader Daimler. Volkswagen
made a low-ball initial offer on March 22 to other holders of
MAN stock as it pushes for full control.

VW, which already owns 75.03 percent of the Munich-based
company’s voting rights, will offer 80.89 euros per share.
Investors who don’t accept the cash offer will receive a
guaranteed annual dividend of 3.07 euros per share.